Anthony Napolitano: You can’t just walk into a presentation and say, “I got this great idea, and it’s all based on opinion and even customer research.” People would go, “Okay, that’s nice.” But that’s not really going to move the inertia of the organization.
Chris Goward: This is insights for growth, the show where we hear insights from intrapreneurs, who drive change within large organizations. I’m Chris Goward, founder of Widerfunnel. Widerfunnel helps great companies design digital experiences that work. Proven through rigorous experimentation systems. Today on the show, we have a great conversation lined up.
Anthony: Anthony Napolitano, I run the consumer services and solutions business for HP, which is basically an organization inside of print to develop alternative business models or services for the consumer segment.
Chris: Okay, great. Now you’ve been focusing for the last few years on HP Instant Ink.
Anthony: That’s right.
Chris: Why don’t you tell the listeners, what’s that all about?
Anthony: Sure. HP Instant Ink was developed about six years ago. It’s a subscription ink business. Customers are purchasing pages, not the ink that they consume. The printers are connected to the cloud, we monitor both their usage and the levels of ink in the printer. We have algorithms that then determine to ship you ink before you ever run out.
Really, the genesis of the program was around solving two really specific pain points that consumers have, and continue to have around printing. One is the costs are too high, and two, you run out, right in the middle of a job. While people are not printing nearly as much as they used to, when print is relevant, it’s relevant, and I need the output. Whether it’s a report or it’s my child’s homework, or whatever it is, lo and behold, of course when you need your printer, you’re out of ink.
We were listening to customers, and it’s really clear that, that was the problem. That was really the genesis of Instant Ink is to solve that for customers by offering a really good value for them. Then ensuring that they’re never going to be out of ink.
Chris: Sure. I’m sure I’m not the only one who has a story of being in university pulling an all nighter, having an important report due the next day, it’s really critical to get this done and realizing at about 10 past midnight, that I don’t have an ability to print this. I’m out of ink or one of the colors has run out or it’s dry or whatever, there’s no stores open, there’s nothing, I can’t do anything about that. Now, maybe I’m the only one who’s had that experience.
Anthony: No, it’s very common, Chris, you’re not the only one. We’ve really improved on that entire process by removing it. It wasn’t that we marginally made it better, we just eliminated it. That’s what customers tell us. We use the term that it’s convenient, and a lot of subscriptions use that term. When we listen to our customers, what they’re telling us is, we removed the chore from their life. We took something that was unpleasant, and just eliminated it.
Chris: Yeah. There’s this story, people don’t want a half inch drill bit, they want a half inch hole. What you’ve done is remove the need to even think about ink, because that’s not what people want, they want a paper, a piece of paper with their stuff printed on it.
Anthony: It’s about the output.
Anthony: That’s why people buy printers, is to do something with it. The consumable is a means to get to that end, and so that’s where Instant Ink really shines. Again, the strength of the program and the business, if you will, is that it’s rooted in that. Yes, it also works for HP. But really, it’s rooted in that, and we don’t waver from that.
Chris: It seems like such an obvious idea that the printer can solve this problem for you. But, that’s in hindsight, and obvious ideas are always that way in hindsight, or innovative ideas are that way in hindsight, they seem obvious. Think back to the emergence of this idea. How did it start? Where did the idea come from?
Anthony: I think it’s really looking externally, is really the genesis of it, from a couple of different perspectives. One is just the emergence of everything as a service. We saw that as a mega trend that was coming seven, eight, nine years ago and still continues to this day, that people really… It’s not so much about ownership, it’s more about access to whatever… Like we were just talking about, a printer is the access to the output.
Then you see that across industries. If you look at many of those industries that have been transformed by subscription, name it, you can go to Blades… Any consumer packaged good has basically been transformed, video on demand, music, everything. The transformation was not led by the incumbent at the time, but it was led by an outsider. Someone who was not really, let’s say, tethered to the old way of doing business. I use that term intentionally, tethered, because when you’re trying to protect the profit pool, you can limit your thinking about how you want to attack that.
I give HP a lot of credit, that we saw that as the leaders in consumer print, it’s much better for us to lead this transformation versus reacting to it. Now, we have a six year head start on really how to make this real and vibrant in consumer print. That’s really the genesis of it. We really wanted to give customers a choice. We continue as we listen to customers, it’s not all or nothing. In fact, the more we tell customers there’s choice, we don’t want to overwhelm them. But the more that we tell them, there’s choice, the more positively they view HP in general, and are more apt to want to purchase HP.
But, I think it really started with that really external lens, and then as I said, Chris, really looking at the customer pain points and how we could solve them, and then the business model was just a way to solve that problem.
Chris: Getting to this innovation, some people might not realize how difficult this is to do. Like you said, you’re the leader in this space, a large enterprise, to take a risk to actually maybe cannibalize your old business model, and change the way people buy. Inside a large organization, that’s really hard to do. Just because HP has a lot of resources doesn’t mean there are not challenges to bringing some of this about culturally or you’re going to face some resistance. Maybe you can speak to some of the resistance at that time, you would have faced. What was that like?
Anthony: Right. Yeah, sure. Naturally, in HP, it’s well documented, our business model. Clearly, we rely very heavily on the print business and more specifically on the consumables business inside of print. That’s public information. Now, you can imagine, lo and behold, you have this now, team or idea that says, we’re going to totally transform that. The way we’ve been doing it and the way we’ve been successful for decades, and this profit pool that we have created and dominated. By the way we’re just going to come in and see if we can totally change that.
It takes a lot of, I would say, courage. But what it also takes is senior, very senior leadership determination and conviction, and I’m not talking about me, I’m talking C-level, that we must do this. It’s imperative that we do this for the future of our franchise, the innovator’s dilemma, all of those books have been written about being frozen, because you’re trying to protect. I think that’s really important that you have that C-level support.
Now, how do you get that C-level support? This is where the data becomes really important, where Widerfunnel has been instrumental in our ability to do this. You can’t just walk into a presentation and say, “I got this great idea, and it’s all based on opinion and even customer research.” People will go, “Okay, that’s nice.” But that’s not really going to move the inertia of the organization.
I think one of the real critical parts of our DNA, and this is true of Instant Ink but even other startups that I’ve been a part of inside of HP, is the reliance on the data. The beauty of Instant Ink is that it’s digital,, it’s software. We have the ability to create hypotheses, test them at a very reasonable cost and time to go make it happen, and really iterate till you find a recipe that says, okay, wow, we actually have something here.
The genesis of Instant Ink was, we had to prove that we could get to a certain level of customer adoption. Before we could get funded to really scale the business, we had to prove that if I could communicate clearly to customers about what the value proposition was, that they would sign up. We ran pilot after pilot, really testing how we could get to that threshold. Once we did, okay, now the company was willing to say, “Okay, let’s take the next step.” Let’s now make the other investments, as you mentioned earlier, to really make this a reality, because our printers have to be eligible, we have to make investment in the cloud, we have to make investment in the supply chain.
There are all those pieces that have to come together, really occurred once we had proven that, hey, we have something that’s really valuable here.
Chris : Okay. It sounds like you had some leeway. You had developed a little bit of air cover to do some pilot projects to really prove this idea and that there was customer demand, right?
Anthony: That’s right.
Chris: Let’s start there, and then we’ll look at how you used that pilot to build the case for further investment. How did you get that initial air cover? Where’d that come from?
Anthony: Yeah, that came from, I would say, the head of our print organization who really was talking about what I was saying before about looking at the external perspective, and saying… Was really trying to believe in a case of change, even though we weren’t facing that we were at that point where we needed to change.
Anthony: Having that, again, that, I’d say foresight and saying, we need to eat our own lunch here a little bit, from two perspectives. One, because it could be a real opportunity for us. But the other perspective is, it could be a real threat. As I mentioned earlier, the transformations typically haven’t been led by the incumbent. I think it really started with that as a catalyst if you will, that says we need to go figure this out.
As you know, I’m sure you’ve seen this, you typically don’t hit it right out of the park the first try. You need some runway to fail. I think that that’s one of the really, I think strong parts of our DNA is that, we have the ability to fail, and fail quickly, and fail cheaply, without making hundreds of millions of dollars investments, and that’s, I think, been leading to our success, is that, that’s been at the core of our DNA.
Chris: Building the test and learn culture into that DNA from the beginning.
Anthony: Absolutely. Without it, we wouldn’t be here today. Even now that we’re a certain size, we still have that as part of our DNA, and we’re able to run digital tests, but also physical tests. Out in the market and do it in a very efficient way, where we’re able to really… Back in science class, how do you have a hypothesis, and are you going to go test the hypothesis. Can you measure the results and, can you do that in an efficient way? I think it’s really core to our success.
Chris: From those early days, were there surprising insights that came out of that, that you could share about what you learned in some of those pilots or some of those experiments experimenting?
Anthony: That you’re testing my memory to try to remember what are some of those things. But, I would say some general statements of things that we’ve learned, and continued to learn, is that it’s not always intuitive. We think, we’re analytical by nature. We think that customers are going to do what’s perfect. The reality is, is that’s not always the case. Why do customers determine why they pick a certain plan or sign up or not sign up? We try to get those insights in data, from it, but there’s sometimes reasons that customers have that they have done something that you would view as imperfect.
I think that really comes down to really being open and not biased when you’re running a test or a hypothesis, to ensure that you can get a result that might really stretch your mind as to your understanding, wow, we really need to be careful about assuming that it’s a very logical process in the world. As you know, it’s just not.
Chris: I think that’s actually a profound insight. That’s something that we found over and over again. We at Widerfunnel, of course, we’ve been experimenting since 2007. One of the things that I think is the most common challenge that we need to overcome is that companies go to market with messages and products and user experiences, customer experiences, based on their own perception of the world. They’re inside the bottle, seeing things from their perspective and they’re naturally more comfortable with everything to do with that product because they’ve been developing it, they’re indoctrinated into this. It’s really hard to break out of that and see the customer’s perspective with virgin eyeballs that have not been exposed to all of that pre-existing knowledge.
That insight about the way customers might process or make decisions being non-intuitive is simply because of the perception differences. That’s such a big gap.
Anthony: Just think what a trap that is when you’re trying to transform something, then you’re relying on, this is the way it happens in our business today. So, that must be the way it’s going to happen in this new way of thinking. That’s why… again, in my career, that’s why these creating and these new… again, we call them startups, it’s not truly a startup, but these entrepreneurial businesses are always fascinating to me, because I’m learning it for the first time and I try to apply my experiences at a foundation level, not at a, I’ve done this before, to now, try to create something. To me, that’s what I want to do, and that’s what I continue to do.
Chris: That’s interesting. You refer to it as this startup within the organization, right? What did that startup team look like in the early days?
Anthony: I think this is really important. Like I said, I deal with Instant Ink now, I was in another one of these before around retail photo, that actually isn’t still around. I have this unique perspective of the business that I’ve started and actually had to sunset, and now, in Instant Ink, which is growing a vibrant business. I think the org structure is one of the most critical success factors that I’ve found inside of a large company. I can speak about my experience at HP.
You need a team that is truly empowered to incubate the idea. What I mean is 24/7, that team does nothing else but work on this program, and that’s all they do. You need enough critical mass of the functions to be able to do that, which in a large organization is typically not the way things are set up. They’re typically more matrixed because as you grow, you need people that are focused and specialized on certain things. Well, when you’re starting, that’s not what you want, what you want is to control enough of the levers to really be nimble and test the concept, all under one roof, if you will, not having to get alignment across the entire company to do one thing. It really stifles the innovation of that.
When we started Instant Ink, we had a lot of the levers in one house, from the product management piece of it to, the marketing elements, to the engineering, all the way out, all the data and insights piece of it, all the way out to, let’s say our customer facing functions were all under me. That gave us the degrees of freedom, if you will, to be able to prove and really, all along the way continue to prove that this is a viable business for HP. I think that’s super, super important for anybody trying to do this. If you can’t get that, then you’re just going to be spending all of your time trying to convince other organizations that they should be paying attention, when, frankly, it’s inefficient for a company to operate that way.
You don’t want people who are responsible for managing a 10th of a penny and operating at massive scale to now say, “Oh, these guys want me to do something totally different?” It’s inefficient for that group and inefficient for the startup group. So, we won’t do that.
Chris: This seems like a solution to this, the innovator’s dilemma problem that you mentioned before, where in a large organization, if I’m responsible for X amount of revenue, and there’s this new innovative idea down here, and I’m responsible for that too, but that’s a fraction of the revenue contribution to my KPIs, my personal incentives, there’s no way I will spend the time on that new innovative idea because I simply don’t have the point of view, the length of view to be able to see the impact on the business and it’s not in my personal incentives, right?
Anthony: Yeah, and even the company’s incentive. That big group, let’s say, is responsible for driving 90% of the company’s revenue, how many people in that group do you want focused on this new thing that has 0% of your revenue? There is an art there. I don’t want to say that oh, in Instant Ink, we developed everything ourselves, that’s not true. Where we could leverage, we leveraged. We also have the degrees of freedom that said, if we couldn’t leverage we could create.
I think that’s inside of a big company, people get a little concerned about the rogue group, because that’s inefficient, and boy, you guys are going to go create this thing, and now, how are we going to integrate it into the machine? There definitely is an art to that.
I could say, I’ve lived through the entire lifecycle. I think, there is no scale phase, unless you have the start phase, which is you’ve proven that not only the customers want it, but that there’s a value prop for the company, and you have shown that this can actually work at scale, again, for a large company, that’s important. I think, once you’ve had the ability to do that, now, there’s this art piece, which is okay, well, how do get the rest of the company to work for you, versus this team is now isolated from, now taking advantage of even more ability to scale.
I think that’s really the… Again, I keep saying art, because there is no like, oh, you hit this threshold and now it’s time to break up the team. It really depends on the situation.
Chris: Well, I think the word art is perfect. In fact, that’s how I would describe it, is there is this intuitive sense you get when you’re managing that, and especially if you’ve had experiences in the past of seeing it fail. Sometimes people come to business with almost religious fervor about the way things should be done. There’s this religion about breaking down the silos, and then there’s another religion about having innovation groups and another religion about innovation should come from everywhere and be democratized. It seems like there isn’t one right way to do things.
Anthony: No, definitely not. I think that is probably a company by company discussion. I know at HP, their innovation is everywhere. It is part of our DNA. But again, my experience is that. What’s interesting is I think there are people, at least in HP who get really excited about that early stage, garage, two people, let’s go figure it out. Then there’s a lot of people who are really good at operating at scale, because we’re a very large company and we’re efficient and whatnot.
That space in between, Chris, that space is, I think, a different skill set, frankly. To be able to go from an idea to, I call it the pragmatic phase, where we know what we aspire to be when we start talking about scale. But you can’t apply processes that a multi billion dollar company is using to a business that has 100,000 customers, it’ll break.
But along the way, I think it’s absolutely critical, and I’ve seen this, where these startup groups fail, is they lose sight of… We have to have credibility. We’re a growth engine, and we’re strategic, but a lot of times people use strategy as well as, we can just spend money, and we’re small, so it doesn’t really matter. Well, that is a recipe for failure. I’ve seen that in my career you need to have the same discipline as a large group.
Chris: Even though you’re may be small.
Anthony: You need to have quarterly objectives. You need to show that you can manage your budget, and you could hit your P&L, because otherwise, then the corporation starts questioning, well, is there really a viable business model here, or is it, oh, we could sell stuff but really can’t ever make any money. You need that balance of, yeah, we have the freedom to try and we’re going to fail. But you also need the discipline that says I have a methodical process here, and we’re going to continue to show improvement, time and time again.
Chris: Okay, it sounds like there’s… The org structure you’ve talked about is critical to having success, but then also, the balance of how much resource this idea is given, and the discipline to actually be accountable for having an end game and having iterative improvements and showing your homework.
Anthony: Absolutely. I’ll take this lesson I learned from one of the businesses that I ran that didn’t make it. I actually wrote a white paper on it. One of the reasons that we didn’t succeed is something that I call we lacked strategic focus. What I mean by that is, at the time, we were granted a very long runway. What that meant was, a really big investment put behind us, because the senior leaders at the time really believed that this is a great business for us, and we should win. Just really gave us a ton of resources, which was one of the reasons we failed.
The reason is because it doesn’t force you to make any hard choices. You do things because you can, because you have the investment, not because you should. I think that’s really important to have this. There’s a value in being constrained, is it forces you to pick your bets, forces you to do your homework, and it forces you to maybe make small bets to test the concept before you make the big bets.
I think it’s absolutely critical that the team is given constraints. Yes, you need to apply resources, but it can’t be a blank check. I think that’s a recipe for failure.
Chris: Yeah, innovation requires constraint.
Chris: Discipline doesn’t come in the lap of luxury, discipline comes when it’s a necessity.
Anthony: Exactly right. Urgency or something is driving that well, we have to make a decision here or a choice here. I think that’s been, I think, one of the keys to the success of Instant Ink is that, yes, while we’ve been given the ability to go make the investments, I think we’ve been very judicious. Coming back to the data, we’re able to continue to show we have all this data, and it opens people’s eyes to what we know about our customers and what they’re telling us, that really in a transactional business, you don’t have. I think that really helps build momentum is that every time we come back with a story, it’s a new insight, or a new, wow, we actually prove that it’s not a theory, we’ve been able to prove it. It just gets people really excited about what we should do more of, and what we need to continue to do more of. It’s really been helpful.
Chris: There’s something there about… It reminds me of how relationships develop, I believe, with an imprint on how they start. I think that’s true in organizational culture as well. If the culture starts with one of discipline and rigorous attention to detail and customer focus, then that culture develops. That’s part of the story and that’s how it continues. There must have been some other challenges as well, you think in a large organization, often, one of the things that stops innovation is existing channel relationships.
Chris: How do you overcome that particular problem? Because I see that coming up quite often in enterprise?
Anthony: It’s a great area to discuss, because in my organization, whenever we look at a new strategy or program, we look at a framework we call the 3C’s. It’s what’s the value proposition for the customer? What’s the value proposition for the channel, and what’s the value proposition for the company? If you can’t answer that question for all three, you’re not going to have success. I think for, at least B2C subscription in general, and especially, we’re talking about a company that has a transactional, let’s say legacy to it, is the channel dynamic.
For us, that could be retailers, it could be anything. Look at cars in a dealership, for example, a lot of those models where they’re trying to transform the car industry, while they’re struggling, because dealers are buying inventory and they’re supposed to sell it. Now, you want to go subscribe? What is this? I think that’s a real critical component that I think people often miss. For us, we knew, and continue to know that consumers are buying HP’s products, by and large, through channel partners. Changing customer behavior is not really… That’s a very difficult thing to do. We knew early on that, okay, the success of our program is going to be, can we engage the channel to want to sell this service, because the best time to sell the service is when someone’s buying a printer. That is the best time to talk to them about an ink subscription business.
We put a lot of time and effort in terms of creating programs that would help them see the benefit to them. As someone had said earlier, Chris, it’s about choice. We don’t force people into subscription, but we want customers to have a choice of how they are getting their consumables. What we found is when you give them a choice, it really helps bring people to HP, and those channel partners who really get behind the program, really see benefits, tangible benefits to them, that they couldn’t just see in a transactional way.
While it’s not been easy, I think it’s been a critical part of our success, and I would encourage anyone who has a channel type business, trying to do it alone, and expecting that customers are now going to buy in a completely different channel, I highly wouldn’t recommend it. I would not recommend basing your success on that. You have to make the investment to have the channel partner see that there’s something in it for them, and that you’re part of their growth story.
I think we’ve been able to do that. I’m not going to say that it’s always been easy. But I think now that we have some time behind us, that they’re definitely starting to see the benefits of participating in a big way.
Chris: Right. If you’ve got an existing channel, you’ve got to bring your channel partners along with you for the ride. Even if there was a compelling reason that consumers should shift their buying behavior outside of the channel. Like you said, changing behavior is hard. They’re not going to do it just because you’ve built a better mousetrap over here. You’ve got to work within the existing system somehow.
Anthony: That’s been our approach. Again, but to the discussion we had earlier, some of the subscription players have done that. Dollar Shave is a great example. They said, “We’re going to change the way people buy, altogether.” But some of those are now moving into retail, too. Some of the box subscriptions, they were totally disruptive, are now going into the channel, or creating their own physical presence. I got to think it’s because they realized that, well, my growth is stunted, and I’m only giving them one channel, which is you have to come to me, and fish where the fish are sort of a thing.
Chris: Well, it’s interesting that you mentioned Dollar Shave Club, we work with Dollar Shave Club as well. Their startup story would have been a lot different because it was really you got the proverbial guy in the garage, the entrepreneur, and he didn’t have the existing channel relationships and incumbent things to work within. We could start with, there’s nothing to lose at that point.
Anthony: Exactly right.
Chris : But with HP, you had to be a little bit more careful. You had to do a bit more navigation and involve more of that part of the environment you were in.
Anthony: Absolutely. It was never part of our strategy that says we’re going to abandon the channel. We had to have… Part and parcel of making it work for the customer, it had to work for the channel.
Anthony: It was always… for sure we’ve created a program that works for customers, because that helps you tell the story to the channel. Is that, hey, we have created something that customers absolutely love, which is if you think of the dynamic between an OEM and let’s say a channel, our job is to create products, services, solutions that customers want to go buy. That’s our job. That’s our job. The channel’s job is to do a great job in selling that. That’s the arrangement that we have. Maybe it’s a little simple, but that is the arrangement.
We took that as our approach is, hey, we’ve created something that really addresses problems that everyone could nod their head and understand what the problem was.
Chris: Yes, we get it.
Anthony: We did it in a way that they could participate. I think that’s really important that they can participate. The more they want to participate, the better off they will ultimately be. Again, I’m not going to say that it’s always been rosy and all the conversations that have been super easy all the time, that’s not the case, but we never created this to abandon the channel.
Chris: Let’s talk about the benefit to the customer or the benefits to HP of having this direct customer relationship. That would have changed a lot, if it was not working through the channel completely and now developing those direct customer relationships, because I think this is probably the first time HP had done that.
Anthony: Yeah, we have an HP store that you could buy from, but it’s not a predominant channel. Let’s just put it that way. It’s there more for browsing. The customers typically want to go to the company’s website to see what products they have and then, they do their search and they then buy where they buy.
Yeah, we’re definitely B2C for sure. The channel does participate in that, but all of the relationship is really between HP and the customer. I think that was part of the, let’s say, hope, when the business was created, was that, while it must be good if we have a relationship with the customers, not really knowing how it would be good, but that was part of the, let’s say hypothesis of it. It’s proven to be a central part of the benefit and the value of the program is because we’re building loyalty directly with our customers. They’re seeing HP as the provider of not just the product, but basically what makes the product worthwhile. It’s basically, I bought the printer not so I can go buy ink, I bought the printer, so I can go make whatever I need to go make.
They view this service that HP is providing is now just enhancing what I bought the printer to go do. The loyalty and the perception that they have of HP is a real benefit of the program that goes beyond any financial P&L view.
Chris: Sure. Developing more of this loyal relationship directly with customers must enable more customer insights, right? You’ve talked about data and experimentation. What would you say are some of the most important ways the Instant Ink team gains insights about your customers and uses this new relationship channel?
Anthony: No, that’s a great question. We have several touch points with our customers. Now, we’re very cognizant of not, let’s say overdoing the communication with customers. We try to be thoughtful and reach out to customers when they tell us they think it’s relevant for us to reach out to them. Because that’s part of the trust, we’re not just going to keep spamming you with marketing, we’re not going to keep surveying you, we’re going to reach out to you when we think it’s a value to you.
But having said that, there’s several places that we get this data and insights that we use to help formulate our strategy. Part of that is through just our conversion, and our digital conversion. Whether it’s through an enrollment flow or a website, we try to get insights and understanding where are people dropping off and how can we improve that? That’s obviously a place that Widerfunnel is integral into our efforts there. We get insights when people try to cancel. We ask them, “Hey, why are you canceling?” We try to provide them something that’s personalized to them, based on the reason that they told us that they’re canceling.
We do surveys from time again. We’ll do an email survey so that we get information from them. We have a dashboard that people can go to. We also look at, what is most useful for customers? Where do they tend to navigate to when they do that. Obviously, we have customer support, which is another place where we get a ton of data, and understanding.
That’s pretty traditional, people typically get that funnel, but all the other ones are really unique to a B2C business that we’ve created. All those touch points are an opportunity for us to get valuable data and then turn those into insights then determine what new parts of the service we’re going to create.
Chris: Right. It sounds, there’s a mix of different methodologies used. Similar quantitative surveys or analytics, watching how people are behaving with qualitative and the customer directly… Interviews or feedback, customer support those kinds of things. Then feeding some of those insights, of course, at Widerfunnel, you mentioned has been building experiments and experimentation programs with HP Instant Ink for quite a few years now since I think 2015 or so. How has experimentation and that program played a role in the company’s growth?
Anthony: I think it’s been instrumental, because as we’ve been talking along here, that’s not in HP’s, let’s say, DNA. We didn’t, because we’re transactional. That experience is typically done by a customer in a retailer setting or online. I think we realized early on that there are a lot of things that we should home grow, this isn’t one of them. There are experts such as yourselves in this space, that really, we cannot afford to just try to learn on our own, and let’s rely on those who, this is their core competency.
I think, very early on, it became, I would say an integral part of everything that we do. We’ve talked about piloting and testing. I love just saying, when I give presentations to our CEO, et cetera, it’s like, our service changes every week. They go, “What? What do you mean?” I’m like, “Every single week, we do a drop of software, and we’re learning through our A/B testing, and we’re improving, we push the winners, and we do that all the time.” That’s a very basic example of how different our business is, than our traditional business is.
Typically, you have the product that you develop, it might take a couple of years, you put it in the market, you hope it sells and you’re developing the next one. That’s not us. We’re literally improving the service every single week, and the insights we get from Widerfunnel definitely help us to do that. There’s just a myriad of examples that we can go into either now or later about specifics that we’ve learned through working with you guys.
Chris: Oh, cool. Well, it sounds like that culture of experimentation started from the beginning. You had this incubated startup group that was really iterating in pilot project experimentation from the beginning. You came in with that ethos and then decided, you know what, the actual practice of becoming an experimentation expert isn’t something we want to develop as our core competency, and it’s not something we’ve come in with. So, let’s bring in an expert partner to help with executing that on an ongoing basis.
Anthony: Absolutely. I think, we do these digital tests with you, but we’ve also expanded that to be able to do physical and market tests, which is a little more complex, because now I have to do something to the product or to the marketing or something to now go test in the market, that what we saw in digital, we will apply when we get to physical. Because you definitely get a lot of benefit of being able to do it, when you’re looking at a conversion flow, because it’s relatively quick, it’s not nearly as expensive as building a prototype and getting it into market, but it’s also one part of the flow in the funnel. It’s not what a customer would see, necessarily when they go out into the market, but at least gives you an indication, okay, wow. Okay, now we got something here, now, let’s try to amplify that with an in market type of a test.
That’s typically how our processes work, is let’s see if we can get a kernel of goodness. Then when we see that we have that, we try to amplify it before then we make the investment to scale it, let’s say. That’s typically the way we do things.
Chris: Yeah, and I think that’s a really important insight because a lot of people think about A/B testing as conversion optimization or a simplistic form of just goosing results on landing pages or websites. But if you look at it more as you’re optimizing the customer experience as a whole, and you should be looking at the questions you need to ask as a business, and identifying the most efficient way to get those indicators that then can scale out to the rest of the organization. If you take that view of answering questions that solve business problems as an experimentation being the method of doing that, then, it’s a completely different lens on how experimentation is run.
Anthony: Couldn’t agree more.
Chris: That’s smart, is using digital experiments or using customer feedback or whatever is the most efficient way of gaining that to feed those insights into the more involved experiments that might be more larger scale, physical products related.
Anthony: Right. Then going back to looking at okay, when we did the digital test, are we seeing something that’s the same? Is it amplified or not? Do we get a different result? If so, why? Why did that happen? What went on here is that now when somebody saw a very consistent offer, let’s say, from the time they were, whatever, buying the product to the time they were enrolling that you would think would amplify the result. Why did you not see the same thing?
Typically, we see directionally the same thing, but sometimes, maybe we don’t or sometimes, Chris, we see stuff that is so powerful in doing our testing experimentation, that we just say, let’s go. We don’t need to take another step. We’re so confident now that we have the winner, let’s get right into development. That happens too.
Chris: Yeah. I think that’s the question why is the most important one to always be asking and not to be just looking binary at okay, win, loss, yes, no, happy, sad, but why did that happen? How do I learn from that and continue iterating on the understanding of the customer and what they ultimately want?
Anthony: That’s right. They change, right? The customers change too, especially with what has recently happened with COVID, we’re now looking at this cohort to be potentially different than other cohorts we’ve seen before. We don’t know the answer to that, but we definitely are going to be looking to see, did we capture a totally new or different customer that we never really thought existed?
Chris: Yeah, and you know what, it’s interesting you mentioned that because we’re definitely seeing that across all industries and all of our clients that we work with is, the consumer behavior has changed dramatically since the lockdown. There are new groups of customers coming online that are being forced to come online that never were interested before.
They have a completely different understanding or expectation of the customer experience than those who were the more digital native comfortable types of people. You’ve got to question a little bit some of the assumptions and norms from the past. It’s not going back. There are no “the good old days” that we’re going to go back to, this has fundamentally changed customer behavior, I believe, going forward.
Anthony: Yeah, absolutely. There’ll be lasting effects of this. I think back to where we started the conversation is, your customer value proposition is absolutely being put to the test right now. Either you thought you had a strong customer value prop and it’s now turned out that it’s not. Or the world has changed, and now you’re no longer relevant. Or as in the case with Instant Ink is, it’s just reinforced the value prop. It’s almost like, they say, skate to where the puck is going. That’s like we knew the puck was coming to be cost and convenience was going to be a core part of our value prop.
Well now, with what’s happening, it’s not convenience, it’s necessity, and I want to print and I need consumables. It’s like, wow, I can get something I never have to leave my home, and I don’t have to think about it. By the way, it’s 50% savings on the cost of printing, where have you been all my life is now, the trick, or now the work that needs to be done is okay, these are the same customers. We had customers obviously signing up before. Now, we have this set of customers that their needs are the same or are they different?
That’s the work that we really need to start digging into now, as we get the initial surge has passed and now things are opening back up gradually in the US. Now, we’ll see okay, where are we going to settle out? Are these customers really the same or not?
Chris: It’s a good point, tying it back to the value proposition. Any conversation is enhanced with a good Wayne Gretzky quote. Of course, that’s great. I think, what we’re seeing and we’ve just done some research on consumer behavior as well in the lockdown and they’re saying that if the customer experience that they have in this lockdown time for the new customer that are shopping more online, if it’s a good customer experience, they’re going to be likely to buy again and continue to buy from those brands, give them a good experience. If it’s a bad experience, they’re less likely to buy in the future.
The customer experience digitally and non, becomes very important for capturing that new cohort into having their new habit brand. I think there’s a lot of opportunity that’s happening right now. Brands that think about the way you are, about the customer experience are really going to win.
Anthony: Yeah, I think you’re right. I think you’re right.
Chris: I think that one thing I just wanted to end with, and I think it’s a good place to wrap up. There’s been a lot of great insights here. I guess, just maybe consolidating and thinking about the listener who’s working in a large enterprise. They have ambition and energy to be a changemaker, and be involved in some of these exciting kinds of projects like you have. What would you tell them that you wish you’d known earlier on in your career in doing this and what can they learn from your experience?
Anthony: I think it comes down to the failures that I’ve had and what have I learned from those. There’s really three things that I have learned, that are really required, I think, to have a chance. It’s not a guaranteed formula for success, but it really starts with, you have to have some sort of breakthrough innovation. I’m not talking about breakthrough internally, but breakthrough in the market. You’re 10X better, faster, stronger, whatever, they would already exist in the market. If you don’t, then don’t even try. Until you have that, until you have that proof that you have something that is really a game changing, you’re just going to be spinning your wheels out there because you’re trying to create change. You’re not going to create change unless you’ve already created a great value proposition for a customer, whether that’s a business or a consumer.
I’d say, that’s got to be your first focus. The second is something we talked about here is really around strategic focus, and making sure that you’re constraining yourselves and you’re placing your bets, and you’re being judicious about how you’re approaching proving out that hypothesis in the market. We talked about piloting and the mentality that it takes to go really prove these things out.
Then the third thing, as we talked about, as well is really the organization, I would say structure and champions inside the company that are really critical for the success. This idea of having an incubation team, I think is mandatory, in my point of view. It’s necessary, but not necessarily sufficient, because you absolutely need champions, very senior champions, who are willing to basically put the flag in the ground and say, “We’re going there. I don’t have all the data that says it’s the right answer yet, but we’re working towards that.”
I think those are really the three, I’d say real recipes and pieces you need of the recipe, let’s say, to be successful.
Chris: Okay, that’s great. You need a 10X innovation. You’ve got to make sure that you have the discipline and rigorous focus in your efforts and the right org structure to have the startup.
Anthony: The champions. That’s right.
Chris: The champions for that. Okay.
Chris: Awesome. Well, thanks so much for your time, Anthony. It’s been really insightful and a pleasure talking with you.
Vice President and General Manager, Instant Ink Subscription Service
Founder & CEO